Are you having difficulty knowing how to start investing? Perhaps you feel overwhelmed by too many investmentInvestment An item of value you buy to get income or to grow in value.+ read full definition choices and too much information? These feelings can lead us to keep putting off investing for “later,” even when it’s in our interest to get started now.
Overcome behavioural biases to reach your investing goals.
Research shows that we tend to follow the path of least resistance. This means that we frequently won’t make changes in our lives without a strong incentive or motivation for doing so. Examples in everyday life include people’s unwillingness to change banks or insurance policies, even when there is readily-available evidence of similar products offering better savings rates or lower costs.
When you’re working in an unfamiliar context, or are dealing with an overwhelming amount of information and choices, you’re even more likely to stay put—you could feel paralyzed by the complex choices you’re presented with, and as a result you may fail to make any choice at all.
Because investing is both unfamiliar and complicated for most of us, it’s an area where inertia is most likely to prevent us from acting in our own best interest. You may have cash in your chequing account that could grow through investing, but fail to do anything with it because investing seems too complicated and you feel that don’t know enough about it. You might tell yourself that you’ll get started eventually, only to tell yourself later on that it’s now too late to get started.
To overcome inertia, a strong motivator is needed. This means thinking about the benefits of taking action now. For example, imagine your life in 20 years, and how saving and investing now will make your life better. It’s best to think of these goals not in dollar amounts, but in concrete changes to your life—like retiring earlier, taking more vacations, or putting the kids through college.
Once you have concrete goals, these goals can motivate you to overcome inertia and seek out the information you need to start investing:
- Our Getting started section will help you with what you need to know before you begin investing. Understanding your current financial situation and finding out your investing personality will give you a head start.
- Some investors work with an advisor to help with investing and financial planning. Our Working with an advisor section will give you important information so you can approach someone with confidence.
Finally, automating your saving or investing can make saving and investing your “path of least resistance,” something that tends to lead to higher savings over time. Consider joining a workplace savings plan or setting up automatic deposits to your savings accountSavings account A bank account intended for depositing funds. Pays interest and lets you withdraw cash at any time.+ read full definition.
Read the full report
If you’re interested in how leading practitioners and regulators around the world are using behavioural insights to address issues in capital marketsCapital markets Where people buy and sell investments.+ read full definition and improve outcomes for investors and market participants, read the Investor Office Report – Behavioural Insights: Key Concepts, Applications and Regulatory Considerations (OSCOSC See Ontario Securities Commission.+ read full definition Staff Notice 11-778).